Analysts Get It Wrong, So Here’s How To Make Your Own Predictions

Theodora Lee Joseph

8 days ago1:22 min

Analysts Get It Wrong, So Here’s How To Make Your Own Predictions

Companies’ earnings announcements can help you pick the next big winners, but it’s not as easy as picking out the fattest profit or fastest growth. Instead, you’ll want to find the firms that surprise investors on results day, and blow past the expectations that have already been priced in.

But bear in mind that predicting a company’s earnings is a ridiculously tricky task. The chart above tracks the evolution of estimated yearly earnings per share (EPS) over the last two decades, and you can make three important observations. Firstly, most of the lines aren’t flat, which means analysts aren’t very good earnings forecasters. Secondly, analysts tended to underestimate earnings the most during recessionary years (2001, 2007 to 2009, and 2019 to 2020). Finally, while the 2023 estimates mig

Limited introductory offer

Subscribe Now 50% Off

Get full access to daily stories, insights, deep-dives, interviews, podcasts, and more

Have an account? Log in